As China comes out of lockdowns, the competition to buy oil just got much more expensive. US oil reserves are also down, and Saudi Arabia is busy raising prices. Brent crude just hit $120 per barrel.
Does anyone remember April 2020, when oil prices briefly fell below zero because storing oil was more expensive than buying it?
To combat rising prices, India has been making very large purchases of discounted Russian oil - purchases from Russia jumped 500% to 840,000+ barrels per day this May, compared to May last year (when it was 136,774 bpd). With Reliance, IOC, BPCL and HPCL planning new six-month contracts for Russian crude, the purchases are not stopping anytime soon.
Interactive chart - hover to see data
Despite these big buys, the price of India's oil basket is getting costlier and crossed above $116 per barrel in June (see chart above). The rise in oil prices will fuel inflation, an important issue as the RBI met this week to push through another rate hike, raising the repo rate by 50 basis points to 4.9%.
Stock markets: All eyes are on earnings now
US equities have fallen 15% from the peak they saw in the first week of January. India's Nifty50 on the other hand, has fallen just 3.1% over the past six months. Earnings Per Share (EPS) has risen steadily for Nifty50 companies over the same period (pink line in the chart):
Nifty50's performance over the coming months will depend on how Indian companies' earnings are in the June quarter.
Management across sectors - from FMCG to specialty chemicals - have all said they have hiked prices. Rising prices may hit company earnings in the June quarter, as consumer spending slows. India's consumer spending growth fell to 1.8 percent in the Jan-March period from a year earlier. It had grown at 7.4 percent in the previous quarter.
Lose lose situation for India's loss-making startups
As the RBI hikes rates amid high prices, investors should be careful about newly listed high-growth, loss-making companies. These businesses - like Zomato, Paytm, PB Fintech - rely on a steady inflow of investor money to keep growth going. But investor capital is likely to see a sharp slowdown in the coming weeks and months as interest rates go up and capital becomes more expensive.
So are Indian startups losing their shine? See Deeksha Janiani's video analysis:
Interesting reads
One of India's fastest growing specialty chemicals companies has aggressive growth plans, Ketan Sonalkar writes.
L&T has outlined its hopes and dreams in its Lakshya 2026 plan. Can it execute?
Mid-tier IT firms - Mindtree, Tech Mahindra, Coforge and others - are set to have a topsy-turvy FY23, Vivek Ananth says.
